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Citizen Financial (CFG) Tops Q4 Earnings on High Revenues

Driven by higher revenues, Citizens Financial Group, Inc.CFG delivered a positive earnings surprise of 5.8% in fourth-quarter 2016. Adjusted earnings per share came in at 55 cents, beating the Zacks Consensus Estimate of 52 cents. Also, the reported figure improved 31% year over year, on an adjusted basis.

Organic growth was reflected in the quarter with continued growth in loan as well as deposit balances, along with higher revenues. On the downside, the company recorded increased expenses and provisions.

Net income available to common shareholders jumped 27.6% year over year to $282 million, on an adjusted basis.

For 2016, net income available to common shareholders climbed17.1% year over year to $1.01 billion, on an adjusted basis. Adjusted earnings came in at $1.93 per share compared with $1.61 in 2015. Results surpassed the Zacks Consensus Estimate of $1.91.

NII & Fee Income Drive Revenue, Loans & Deposits Growth Continues

For 2016, total revenue was $5.3 billion, surpassing the Zacks Consensus Estimate of $5.1 billion. Further, revenues improved 10.4% year over year.

Total revenue for the quarter was $1.36 billion, surpassing the Zacks Consensus Estimate of $1.33 billion. Further, revenues were up10.6% year over year.

Citizens Financial's net interest income increased 13.3% year over year to $986 million. The rise was primarily attributable to average loan growth. In addition, net interest margin expanded 13 basis points (bps) year over year to 2.90% mainly due to enhanced loan yields.

Also, non-interest income climbed 4.1% year over year to $377 million. The rise was stemmed by strength in capital markets and mortgage banking fees, partially offset by reduced card fees, trust and investment services fees and service charges and fees.

Non-interest expenses were up 4.6% year over year to $847 million. The rise highlights higher salaries and employee benefits expense, other expense and amortization of software expense. On an adjusted basis, non-interest expenses increased 5% year over year.

Efficiency ratio declined to 62% in fourth-quarter 2016 from 66% in the prior-year quarter. Generally, lower ratio is indicative of the bank's improved efficiency.

As of Dec 31, 2016, period end total loan and lease balances increased 9% year over year to $108.3 billion, while total deposits rose 7% from the year-ago quarter to $109.8 billion.

Credit Quality: A Mixed Bag

As of Dec 31, 2016, allowance for loan and lease losses decreased 2% year over year to $1.24 billion. Provision for credit losses grew 12% year over year to $102 million.

Also, net charge-offs for the quarter jumped 35% year over year to $104 million. Additionally, total non-performing loans and leases edged down 1% year over year to $1.05 billion.

Solid Capital Position

Citizens Financial remained well capitalized in the quarter. As of Dec 31, 2016, Common equity Tier 1 capital ratio was 11.2% compared with 11.7% at the end of the prior-year quarter. Further, leverage ratio came in at 9.9% versus 10.5% as of Dec 31, 2015. Total Capital ratio was 14.0% compared with 15.3% in the prior-year quarter.

Capital Deployment Update

As part of the company's 2016 Capital Plan, the company repurchased 6.3 million shares at an average price of $28.71 per share, during fourth-quarter 2016.

Citizens' board of directors announced an increase in quarterly cash dividend to 14 cents per share, an increase of 2 cents. The dividend will be paid on Feb 16, 2017 to shareholders of record as on Feb 2.

Outlook 2017

The company's Tapping Our Potential ("TOP") initiatives remain on track. In 2016, TOP II recorded about $105 million of annualpre-tax benefits. Further, TOP III is expected to result in pre-tax revenue and expense run-rate benefits of $100 million to $115 million, including $20 million of tax benefits in 2017.

Our Viewpoint

Results highlight a decent quarter for Citizen Financial. We remain optimistic as the company remains focused on several of its initiatives to grow revenues and improve efficiency. With a diversified traditional banking platform, Citizens Financial remains well poised to benefit from a recovery in the economy of regions where it has a footprint. However, regulatory issues as well as competitive pressure remain matters of concern.

Citizens Financial Group Inc. Price, Consensus and EPS Surprise

Citizens Financial Group Inc. Price, Consensus and EPS Surprise | Citizens Financial Group Inc. Quote

Currently, Citizen Financial carries a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other Banks

Bank of America CorporationBAC reported fourth-quarter 2016 earnings. Rise in trading revenue as well as mortgage banking fees led to earnings of 40 cents per share, which surpassed the Zacks Consensus Estimate of 38 cents. Further, the figure was 48% higher than the year-ago quarter number.

Driven by interest income, Wells Fargo & Company 's WFC fourth-quarter 2016 earnings recorded a positive surprise of about 3%. Adjusted earnings of $1.03 per share outpaced the Zacks Consensus Estimate by 3 cents. Moreover, it compared favorably with the prior-year quarter's earnings of $1.00 per share.Including net hedge ineffectiveness accounting impact of 7 cents, earnings came in at 96 cents per share.

Comerica Inc.CMA delivered a positive earnings surprise of 4.2% in fourth-quarter 2016. Adjusted earnings per share of 99 cents came ahead of the Zacks Consensus Estimate of 95 cents. The adjusted figure excludes a restructuring charge of 7 cents per share. Also, earnings increased 43.8% year over year.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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